The Hidden Dependencies That Can Stop Production
By Melanie Brickley, Managing Advisor | Manufacturing & Distribution
Your most important asset may not be your most expensive one.
Ask a manufacturing executive to identify the most valuable assets in the business and the answers are usually predictable: The building, production equipment, inventory, tooling.
All are important. But I believe there’s another question leadership teams should be asking: What does our operation absolutely depend on to keep producing tomorrow?
The answer may be a $5 million production line, but it could also be one specialized component with a six-month lead time.
A single-source supplier, piece of tooling that can’t be easily replicated, a utility service without adequate redundancy or one bottleneck in the production process that limits the capacity of everything around it.
In manufacturing, asset value and operational importance aren’t always the same thing.
Understanding that distinction can change the way leadership thinks about preventive maintenance, spare parts, capital investment, business continuity—and ultimately risk.
Here are five dependencies I believe every manufacturing leadership team should understand:
When evaluating property risk, it’s natural to focus attention on the largest and most expensive equipment. But replacement cost doesn’t necessarily tell you how important a piece of equipment is to production.
Consider a relatively inexpensive machine that sits at a critical point in the process.
Everything upstream can continue producing and everything downstream has capacity. But if that one machine goes down, WIP begins accumulating and throughput drops—or stops entirely.
That’s a bottleneck. But from an operational standpoint, it may be one of the most important assets in the facility.
The questions I encourage manufacturers to consider aren’t just What is this equipment worth?
They are: What happens to production if we lose it? Is there another way to perform this process? How long would it take to repair or replace?
A $100,000 machine with no workaround and a nine-month replacement lead time can create a much larger business problem than a $2 million machine that can be replaced quickly or whose production can be shifted elsewhere.
Understanding equipment criticality requires looking beyond the property schedule and into the production process itself.
I often hear a reassuring phrase when discussing critical equipment: We have a backup. That’s a good start but then come the questions.
Can the backup handle the same throughput? How quickly can it be brought online? Does it require different tooling? Are employees trained to operate it? When was it last tested under production conditions? Can it meet current customer commitments?
A backup that can only support 40% of normal capacity isn’t necessarily redundancy. It may still be extremely valuable—but leadership should understand what operating at 40% capacity means.
Which customers get priority?
How quickly does WIP accumulate?
Can production be outsourced?
What happens to margins if overtime or expedited freight is required?
True redundancy isn’t simply about having another machine.
It’s understanding whether the alternative can realistically support the business when the primary option isn’t available. A backup plan is only as good as the capacity it can actually deliver.
Manufacturers have spent years strengthening their own operations, and increasingly, some of the most important dependencies exist outside their four walls.
A single-source supplier may provide a relatively inexpensive component that is essential to production. If that supplier can’t deliver, the value of the component itself may be almost irrelevant.
The bigger question is: What happens to your production line without it?
Raw materials don’t arrive, production slows, WIP may become stranded, and customer commitments become harder to meet.
Suddenly a disruption that is hundreds, or thousands, of miles away is affecting your revenue.
That’s why I believe supplier conversations need to go beyond price, quality, and delivery performance. Leaders should understand:
A supplier doesn’t have to represent a large percentage of your purchasing spend to represent significant operational dependency. Sometimes the least expensive component can create the most expensive interruption.
We don’t always think of utilities as production equipment. Operationally, they might as well be. Electricity is an obvious example, but depending on the operation, production may also depend on:
A facility can be completely undamaged and still be unable to produce. That’s an important distinction.
Leadership teams should understand not only which utilities are critical, but how long the operation can function without them.
Does backup power support the entire facility—or only life safety and critical systems?
If municipal water service is interrupted, which processes will stop?
Is compressed air generated by one system with no redundancy?
If a utility interruption lasts hours instead of minutes, when does it begin affecting customer commitments?
These aren’t simply facility-management questions. They’re questions about throughput, capacity and business continuity. Understanding those dependencies before an interruption occurs allows leadership to make intentional decisions about redundancy, capital investment and risk transfer.
Manufacturers understand lead time and can manage it every day with raw materials, inventory and customer orders. Lead time deserves the same attention when evaluating critical equipment, tooling and spare parts.
Imagine two pieces of equipment.
Machine A: $2 million replacement cost with a six-week replacement timeline.
Machine B: $250,000 replacement cost with a 12-month lead time.
Which creates greater business risk? The answer isn’t obvious until you understand what each machine does.
If Machine B is a production bottleneck with no redundancy, no available spare parts and no alternative capacity, its financial impact could dwarf its replacement cost.
That’s why I believe one of the most important questions manufacturers can ask about critical equipment is:
If this fails tomorrow, how long until we’re back to normal throughput?
That answer may reveal opportunities to:
Replacement cost tells you what an asset is worth.
Recovery time tells you what losing it could mean to the business.
Identifying dependencies doesn’t require predicting every possible loss. It requires understanding how the operation works.
Consider asking:
The answers can help leadership determine where additional redundancy, preventive maintenance, spare parts, alternate suppliers, contingency planning or insurance protection may be warranted.
Manufacturing businesses are interconnected systems.
Buildings house equipment.
Equipment creates throughput.
Raw materials feed production.
Tooling enables processes.
Suppliers provide critical inputs.
Utilities keep everything running.
People coordinate it all.
The risk isn’t always that one of those things is expensive to replace. The risk is that one of them is essential to everything else. That’s why understanding operational dependencies should be part of more than an insurance renewal.
It should inform capital planning, preventive maintenance, procurement, inventory strategy, business continuity and conversations about capacity. And it should involve more than one department.
Finance may understand the financial impact.
Operations understands throughput.
Maintenance understands equipment reliability and spare parts.
Procurement understands suppliers and lead times.
Sales understands customer commitments.
A strong risk strategy connects those perspectives.
Because when critical dependency fails, the most important question isn’t simply what did we lose? It’s, what can we no longer do because we lost it? That is often where the true exposure begins.
Read the Executive Risk Playbook | Volume 1 "What Underwriters Wish Every Manufacturer Understood"